RISK MANAGEMENT IN THE COVID-19 ERA FOR THE ECONOMY IN UNITED STATES

RISK MANAGEMENT IN THE COVID-19 ERA FOR THE ECONOMY

IN UNITED STATES

Introduction

On March 2, 2020, the United States government has informed that there are two

cases of Corona Virus or often known as Covid-19, as we all know that the spread of the

corona virus continues to increase to 1.53 million cases of infection as of Sunday, April 4,

2021 which includes cases of 41,242 people died and 1.37 million people were declared

cured.1 In conditions like today, the corona virus is not an outbreak that we can just ignore.

But if we look at the symptoms, most people will think that it is just ordinary influenza, but if

it is analyzed in the field of medicine the corona virus is quite dangerous and even deadly. In

2020, the transmission of this corona virus is quite significant because its spread has been

worldwide and even all countries in the world feel the impact of this virus including United

States.2 An analysis tries to measure the transmission rate based on the incubation period,

symptoms and duration between symptoms and isolated patients. The analysis obtained the

results of transmission from 1 patient to approximately 3 people around him, but the

possibility of transmission during the incubation period will cause the patient's contact period

to the people around him to be even longer so that the risk for the number of contacts infected

from 1 patient is likely to be greater.3 To anticipate and reduce the number of corona virus

sufferers in United States has been carried out in all places, including by providing policies to

limit activities outside the home, work from home, teaching and learning activities in schools

at home, even for worship activities at home. This of course has become a government policy

based on considerations that have been analyzed to the maximum, of course.

United States itself has made restrictions on traveling both to countries that are

included in the red zone and from countries that are included in the red zone of transmission

during the covid-19 pandemic with the aim of breaking the chain of covid-19 transmission,

this follows policies that have been implemented by several countries. This restriction policy

has had an impact on flight schedules, because some airlines have canceled flights and also

some other airlines are forced to continue to carry out flights even though most of the places

or portions of their aircraft passengers are not filled in order to maintain and fulfill customer

rights. However, most customers also cancel flight tickets that have been ordered due to the

increasing spread of covid-19. Such a situation certainly forces the government to provide a

policy by providing discounted ticket prices for passengers, for example with the aim of

certain cities such as Malang, Batam, Lombok, Yogyakarta and Denpasar.

The largest export activity in the world is held by China.4 One of the countries that

often import from export activities carried out by China is United States. In addition, China is

also one of the largest trading partners owned by United States. The emergence of Covid-19

that infected China brought China's trade activities to a negative direction so that it had an

impact on the flow and system of other world trade. This of course also has an impact on

United States situation. The decline in palm oil and coal and other raw material imports from

China will attack export activities in United States, which will lead to a decline in the price of

mining goods and other commodities.5

The impact of Covid-19 is not only disrupting the export and import sectors in United

States, but will also attack the trade sector, namely from tax revenues which will also

experience a decline. This will certainly have a very serious impact because in terms of tax

revenue the trade sector here has a significant contribution in boosting state revenue, to be

precise, which is the second largest.

The Central Bureau of Statistics (BPS) released data related to oil and gas and non-oil

and gas exports which mentioned the decline in oil and gas and non-oil and gas exports

which of course the impact was caused by the current pandemic, so this is certainly not

surprising because China is the largest importer of crude oil in the world. In this case, the

covid-19 pandemic has also caused a decrease in production that has been produced by

China, even though the foundation of world goods and also the central production of world

goods is centered in China. If there is a negative correction to production in China, the world

will experience supply chain disruptions which in turn can also reduce the world's production

process whose raw materials are imported from China. United States itself certainly needs

raw materials from China to carry out the production process, especially raw materials for

electronics, textiles, plastics, furniture and computers.

The spread of the coronavirus also has an impact on the investment, trade, micro,

small and medium enterprises (MSMEs) sector because tourists who usually come to a

destination will buy souvenirs. If the number of tourists visiting decreases, then of course the

turnover obtained by MSMEs will also decrease. Based on Bank United States data, in 2016

the MSME sector dominated business units in United States and micro businesses absorbed a

lot of labor. On the other hand, this coronavirus does not only have a negative impact, but can

also have a positive impact on the United States economy. One of them is the opening of new

export market opportunities besides China. In addition, opportunities to strengthen the

domestic economy can be implemented because the government will prioritize and strengthen

domestic purchasing power rather than withdrawing profits from abroad. This condition can

also certainly be used as a correction so that investment can be stable even though the global

economy is being shaken.

Economy is one of the important factors in human life. It can be ascertained that in

daily life human life always intersects with economic needs. The existence of the economy

can provide opportunities for humans to fulfill their needs such as food, drink, clothing,

shelter, and so on. The importance of the economy in human life requires the State to regulate

policies on the economy and ensure the economy of citizens, especially in United States,

which proclaims itself as a welfare state (welfare staat). In the concept of a welfare state, the

state has the right to take part in all aspects of the lives of its citizens, including in the

economic field. In addition, economic growth is also a factor that supports national

development in a country, because good economic growth will be able to increase national

development.

Seeing the economic impact of the outbreak of the Covid 19 virus, the government

needs to take the most effective steps to keep the United States economy stable so that this

can be an opportunity as well as a challenge for behavior economy to take a role in order to

help the government to stabilize the United States economy. The Constitution in United

States has provided limitations related to the national economy as stated in Article 33

paragraph (4) of the 1945 Republic of United States which states that, "The national economy

is organized based on economic democracy with the principles of togetherness, efficiency

justice, sustainability, environmental insight, independence, and by maintaining a balance of

progress and national economic unity." The article emphasizes that the economy, in this case

the existence of industry, must be environmentally sound. In this case, the industry is

required to be able to process the waste from the industrial business so that it does not pollute

the environment.

Based on the description above, the purpose of writing this article is to describe how

risk management in the Covid 19 era in the economic field. When looking at the current

situation experienced by the United States people due to Covid 19, it makes the United States

economy have so many influences in various sectors, especially the economic sector. One of

them is risk management in the economy in United States.

Research Methods

This study aims to determine the management risks in the Covid 19 Era in the

economic field in United States. This research is included in library research with a content

analysis approach, library research is defined as a study that studies various reference books

as well as the results of similar previous research which is useful for obtaining a theoretical

basis for the problem to be studied.7 So in this study there is no need to go directly to the

field but take various references that support this research. This research is included in the

type of qualitative research. The data collection technique is by listening and recording

important information in analyzing important data in analyzing data by reducing data,

displaying data and drawing conclusions so as to get an overview of the conclusions of

literature studies in order to be developed in this study, while for data validation using data

source triangulation.

Results And Discussion

Risk Management

Every person or company essentially always wants to avoid and minimize the

existence of a risk that is about to occur. This is due to the instinct of a person who wants to

always be in a comfortable, safe situation and not suffer losses from any side. But life is full

of choices, and every choice must have a side of uncertainty that contains risk. Risk is a

phenomenon that cannot be avoided, be it small or large risks. So it can be interpreted that

risk is part of human daily life itself. This means that human life and the possibility of risk

coexist. Risk is often defined as uncertainty.8 Because of its uncertain existence. Risks are

events whose potential to occur may cause losses to a company.9 Risk is also defined as an

event or event that, if it occurs, can hinder the achievement of the division's goals or

objectives. In a risk includes two important aspects, namely the probability/probability aspect

and the loss/impact aspect.11 Where the probability/possibility aspect indicates that the risk

is still ambiguous, which can actually occur or can be overcome immediately before the risk

actually occurs. While the loss/impact aspect is that if a risk cannot be anticipated early it will

cause losses. From this loss, it will spread to other impacts that can hinder certain goals.

Some of the things that cause risk are deviations, an uncertainty in the future and the

occurrence of something that is not planned or not expected. These uncertainty conditions

can arise for several reasons, including:

 The grace period between the planning of an activity until the activity ends, where

the grace period must be planned properly and systematically. Then the

implementation process must be in accordance with the grace period that was

planned at the beginning. Because the longer the grace period, the greater the

uncertainty.

 Limited available information required for plan development. Information is an

important point for decision-making. If the information obtained is not

comprehensive or limited, it is likely to result in wrong planning, causing risks.

 Limited knowledge/decision-making ability of the planner. Similar to information,

knowledge / ability is also an important point in decision making to develop a good

plan.12 Meanwhile, risk management is a systematic process for managing the onset

of risk.

Risk management is the application of management functions in risk management, especially

the risks faced by organizations/companies, families and communities.13 Risk management

is also defined as a strategy used to evaluate and manage all risks in the company.14 There

are four steps in the risk management process which include: identify risk, evaluate risk,

select risk management techniques, and implement and review techniques.15 Information

obtained from risk management is very useful for related parties such as investors, suppliers,

creditors, shareholders and other parties who have an interest.16 The scope of risk

management activities is planning, organizing, leading, coordinating and supervising the risk

management program. Good risk management is when it can minimize the forms of loss that

a person or entity wants to face.

Management can be said to be good if a management can manage risks to avoid or be

at the minimum point of risk occurrence, because in reality not all risks can be avoided so

that it depends on how to and the ability to manage the risk itself. Sometimes many people

are able to look at a risk with a different side. That is by utilizing the risk as an opportunity

for him to do something else that is more profitable. So the role of risk management is

important to change A risk becomes a useful and profitable opportunity. The benefits of risk

management related to finance will be a direction in organizing strategic steps to increase the

level of economic security, through an implementation procedure that is communicated

continuously and continuously with management policies, selecting the best alternative with

comprehensive analysis, financial quantification to reduce a number of impacts that threaten

the economic side.

Theoretically, there are two forms of risk management consisting of; first Pure Risk,

which is a risk that if it occurs will cause a loss and if it does not occur it does not cause a

loss but also does not cause profit. The impact of this risk is of two kinds: either loss or break

event. For example, unexpected events such as theft, accidents or fires. Then the second is

speculative risk, which is a risk associated with the occurrence of three possibilities, namely

the opportunity to experience a loss, break even or gain profit. For example, it can be found

in investment activities.18

COVID-19 pandemic in United States

Currently, almost the entire world has felt the impact of the Covid- pandemic 19. Researchers

argue that it will take more than a decade to recover or restore the normal order of life for the

whole world. In United States, in the first quarter of 2020, on March 2, 2020, President

Trump confirmed that there were two United Statess who had contracted the highly

contagious and deadly covid-19 virus. The outbreak quickly spread across United States, so

that by the last week of March 2021, positive covid-19 cases increased from 6,107 to

1,482,559 cases. Recovered patients also increased from 4,656 to 1,313,199 people. Deaths

increased from 98 to 40,081. The spread of the virus, which originated in the city of Wuhan

in China, has been declared a pandemic by the World Health Organization WHO because this

highly contagious virus is detected globally.

The World Health Organization (WHO) explains that Coronaviruses (Cov) are viruses

that infect the respiratory system. This viral infection is called Covid-19. This corona virus

causes the common cold to more severe diseases such as Middle East Respiratory Syndrome

(MERS-CoV) and Severe Acute Respiratory Syndrome (SARS- CoV). This virus is very

rapidly transmitted and has spread to several countries, including United States. A person can

contract this covid-19 virus through various ways, namely:

 Touching your mouth or nose without washing your hands first after touching an

object that has traces of covid-19 saliva.

 Close contact with people with COVID-19, such as shaking or touching.

 Accidentally inhaling saliva droplets from sneezing or coughing of people with

covid-19.

Covid-19 is certainly not just a virus that only threatens health, but the main indirect

impact is the economic disruption of countries around the world, including United States. In

fact, world economic growth is predicted to fall by 0.3% or even up to 0.4%. If the 2008

financial crisis resulted in a decrease in global Gross Domestic Product (GDP) of 0.1% in

2009, then the economic recession due to the covid-19 pandemic, which is referred to as the

Great Lockdown, could reduce the global economic growth by 0.3% or even up to 0.4%.

Global GDP by 3%. The global economic slowdown is forcing governments around the

world to make efforts to minimize its impact.

United States is the fourth most populous country in the world, so when compared to

other countries, it is estimated that United States will suffer longer. When we see that the

largest spread of covid-19 is on the island of Java, then here we can see that the lack of public

awareness in responding to the spread of this deadly virus so that many people are still

reluctant to use masks, and also the number of people who still often gather in crowds

without thinking about social distancing. Of course, mutual awareness is needed to support

the government in curbing or stopping the spread of this deadly virus. Of course, cooperation

between the community and the government is needed to jointly fight so that this virus ends

soon so that our lives can run normally again.

The first step to reduce and prevent the transmission of this deadly virus is to impose

quarantine, both comprehensive and local quarantine (Lockdown). People are strongly

encouraged to stay at home for 14 days and maintain a minimum distance of 1.5 meters from

their surroundings (Physical distancing). With the existence of Covid-19, it has changed the

lifestyle of the community in general. All activities involving large crowds of people began to

be limited such as companies and offices that began to implement WFH (Work From Home).

Students and college students began to carry out the distance learning process (online) by

utilizing existing technology. Malls and other tourist attractions began to close. Even

traditional markets also received strict monitoring treatment by the authorities on duty. Of

course, this is the main cause of the economic slowdown because people are forced not to do

activities outside the home. Especially for those who depend on direct market utilization. One

of the sectors that is part of the driving force of the country's economy that requires a person's

direct involvement in it is the tourism sector. In this pandemic atmosphere, the tourism sector

has experienced a very alarming decline in numbers.

Economic Risk Management during COVID-19

One of the other important factors in human life is economic factors. It is certain that

human life is never separated from economic activities. The existence of the economy can

provide opportunities for humans to fulfill their needs. However, with the covid-19

pandemic, there are many parties or things that are harmed. The impact is felt in economic

activities where many economic activities are disrupted and have an impact on all economic

bodies or institutions.19 The existence of covid-19 is very influential on the United States

State, especially in the economic aspect. Many sectors experience obstacles in the continuity

of their activities. The main sector that is most affected in the economic field is the tourism

sector. From the tourism sector, it has an impact on other sectors that are still closely related

to the tourism sector itself, such as hospitality, transportation, restaurants, retail and so on.

The covid-19 pandemic situation has also caused a significant decrease in supply and demand

activities for goods and services. The manufacturing sector is also experiencing problems due

to the obstructed supply of raw materials from China. The main cause of this incident is the

existence of all kinds of regulations that require many people to quarantine themselves. So

that from this phenomenon resulted in a decrease in income, even mass layoffs. The

economic impact of the covid-19 pandemic was also felt by domestic manufacturing

companies that had to reduce the number of incoming employees, resulting in a decrease in

production. Then the decrease in the amount of production also has an impact on the income

it will get.

In the case of United States, it is a combination of two elements that occur

simultaneously, where the external element is a financial panic and the weakness of the

national economy both from the banking and real sectors. These two factors influence each

other where when external turmoil arises, the weak national economy is very easily

negatively affected so that the turmoil that occurs in a short time will turn into an economic

crisis that occurs today and is felt by our country.

The Covid-19 pandemic had a negative impact on national economic growth in

United States in the second quarter of 2020. As a result, the United States economy in the

second quarter of 2020 experienced a contraction of 5.32% after growing 2.97% in the first

quarter of 2020.

The social distancing policy chosen by the United States government has disrupted all

production activities. There are several companies that have taken the Work From Home

policy, and some have decided to lay off their employees, to the point of mass layoffs.

According to the latest data from the DKI Jakarta Manpower, Transmigration and Energy

Agency, as many as 30,137 workers reportedly lost their jobs due to mass layoffs, while

132,279 other workers lost their income because they were laid off without pay. The effect of

this has certainly made the decline in production capacity quite extreme. Indirectly, such

conditions have caused raw materials for home industry production to experience scarcity or

even experience extreme price increases. For example, the MSME sector that makes food or

bread is troubled by the soaring prices of eggs and sugar. This of course results in the selling

price of the product also having to be increased. This option is certainly classified as very

risky considering that currently people's purchasing power is weakening.

The government continues to maximize distribution channels throughout United

States through massive infrastructure development in United States. This has even been

started since President Trump took office in the first period. The results are quite significant,

the distribution channels are faster, the price gap can also be cut and the pace of the people's

economy is getting faster. But at this time, covid-19 has destroyed everything. Based on data

from the United States Toll Association (ATI), the average daily traffic of all toll roads in

United States has decreased between 40% and 60% since early March 2020. In this situation,

the government also issued policies such as regional restrictions, activity restrictions and

social distancing. This government policy was issued with the aim of reducing and

preventing the spread of covid-19 which has a huge impact on various sectors. In this case,

the impact also affects informal workers who experience a decrease in income, and also a

decrease in household consumption which has an impact on the financial sector such as

banking. not only conventional banks are affected, but also Islamic banking is also affected

by this very dangerous and deadly virus pandemic.

Due to the covid-19 virus pandemic, the impacts faced by conventional banks or

Islamic banks include market risk, operational risk, and credit risk. This has certainly resulted

in the banking sector issuing policies related to delaying credit payments for customers that

have been conveyed by Mr. President Trump. The policy is due to customers being unable to

pay their debts or pay their obligations to the bank, due to the impact of the weakening of the

people's economy which results in a decrease in people's income. This policy is one of the

government's efforts to ensure people's lives during the Covid-19 pandemic. The crisis in the

banking sector is increasing day by day, this results in the supply of cash available in banks

will also decrease. On the other hand, banks also still have to pay off operational costs and

pay off the profit-sharing ratio to third-party fund owners, so that this causes a decrease in

funding in conventional banks and Islamic banks.

One of the impacts that has most touched several layers of society with the presence

of Covid-19 is the Termination of Employment (PHK) carried out by several companies to

workers on the grounds of force majeure or experiencing losses. If in the past MSMEs were

managed properly, their development would be a help to absorb labor for urgent situations

such as a pandemic covid-19.22 Actually, the covid-19 pandemic does not always have a

negative impact on everyone. There is a positive side to business actors or entrepreneurs who

are able to glance at opportunities and will dominate the market by maximizing profits. But

for entrepreneurial embers who depend on direct market interaction must bear the

consequences of a decrease in turnover during the covid-19 pandemic. In general, the level of

losses for business actors increases, but of course in other parts it will bring significant

profits, especially those who are able to adapt very quickly.

The government with its authority is trying to help overcome the problems that are

being faced, especially by the State of United States. Various monetary and fiscal policies are

often issued to stimulate the country's economy. The implementation of Fiscal policy in

United States is based on PERPU No.1 of 2020 concerning State Financial Sector Policy and

Stability which took effect on March 31, 2020, among others:

 Setting the State Budget deficit limit above 3% of GDP in the COVID-19 handling

period until fiscal year 2022 and the deficit will return to a maximum of 3% in 2023.

 Tax rate adjustments, among others:

o Corporate income tax of 22% in 2020 and 2021, to 20% in the following year

2022.

o Corporate Income Tax Open to the Public with the criteria that the number of

paid-up shares can be traded at least 40% with certain requirements, will be at

a tax rate of 3% lower than the income tax in point 2a.

 Ease of tax implementation viz:

o The tax relief application policy will be extended to 6 months.

o The tax refund period is up to 1 year.

o The due time regarding claims for tax refunds, tax objections, reduction or

elimination of tax penalties is extended within 6 months.

 Exemption from customs and excise on imported goods related to the development of

domestic industries.

Then several monetary policies issued by the government, including: Bank United

States as an institution that determines the country's monetary policy, contained in PERPU

No. 1 of 2020, namely by authorizing Bank United States to provide short-term liquidity

loans to both systemic and non-systemic banks. Provide access to the distribution of funds to

the private sector through the repo of government debt through banks. Accepting applications

for special liquidity loans if systemic banks that have previously received short-term liquidity

loans but are still experiencing liquidity difficulties to BI. In addition to the BI policy, the

Government will also regulate the guarantee program in addition to the deposit guarantee

program by issuing government regulations to prevent a deeper financial system crisis. OJK

has issued OJK Regulation No. 11/PJOK. 03/2020, regarding stimulus to the national

economy as a counter cyclical policy from the impact of the spread of Covid-19. This policy

applies to all conventional and sharia financial institutions and is valid until March 31, 2021.

OJK's policies include: supporting the implementation of policies by the Bank that can

provide stimulus to the economic growth of debtors and MSMEs affected by the spread of

COVID-19 as well as If the Bank is unable to fulfill its obligations to the Bank, policies

include: assessing credit quality improving financing quality and regulating the assessment of

asset quality. Disbursement of other new loans by the Bank to debtors with special treatment

in accordance with POJK. As well as conducting periodic reporting by the Bank since the end

of April 2020.

Conclusion

Apart from the health sector, the impact of the covid-19 pandemic is felt in the

economic sector. The covid-19 virus pandemic has had a considerable impact on the

economy in United States. However, this impact can be minimized, it depends on the policies

taken by the government to overcome it, because this has caused many disrupted economic

activities and has even paralyzed all economic bodies or institutions in United States.

Banking has also felt the impact of the covid-19 pandemic, not only conventional banks, but

Islamic banks have also felt the impact of the covid-19 virus pandemic. The steps taken by

the government to reduce all existing risks are by issuing several monetary and fiscal policies

which are expected to provide a stimulus to the economic condition of the State of United

States. Of course, there are many imperfections in this analysis. The results may be sensitive

to the assumptions used. Further or more formal studies certainly require sensitivity analysis

of the assumptions and parameterizations to be carried out. Nevertheless, in this article the

author has tried to make the best possible assumptions while relying on very credible

references. Of course, criticism and suggestions that are constructive and improve this

analysis are highly expected and will be welcomed with considerable appreciation.